EXHIBIT 99.1
CONTACTS:
[ATS MEDICAL LOGO]
Michael Dale, President/CEO Investors:
763-553-7736 Jennifer Beugelmans, 646-201-5447
Michael Kramer, Acting CFO Doug Sherk, 415-896-6820
763-557-2222 Steve DiMattia, 646-201-5445 (Media Contact)
ATS MEDICAL REPORTS RECORD ANNUAL REVENUE FOR 2006
FOURTH QUARTER REVENUE GROWS 8% YEAR-OVER-YEAR
2007 GUIDANCE PROVIDED
MINNEAPOLIS, March 5, 2007 -- ATS Medical, Inc. (Nasdaq: ATSI), manufacturer and
marketer of state-of-the-art cardiac surgery products and services, today
reported financial results for the fourth quarter and full year ended December
31, 2006. Revenue for the quarter was $10.7 million, up 8.1% from $9.9 million
reported for the same quarter of 2005.
During the fourth quarter, revenue generated from products and services other
than the Company's mechanical heart valves increased 66.1% to $2.3 million while
revenue from the Company's mechanical heart valve products decreased 1.0%
compared with the fourth quarter of 2005. Revenues from products and services
other than the Company's mechanical heart valve represented 21.5% of total
revenue in the fourth quarter of 2006 compared with 20.2% in the third quarter
of 2006 and 14.2% in the fourth quarter of 2005.
"2006 represents another year of progress towards our objective of establishing
ATS Medical as a leading provider of innovative solutions in the field of
cardiac surgery," said Michael Dale, Chairman and Chief Executive Officer of ATS
Medical. "Throughout 2006 we successfully executed our strategy to diversify our
revenue and increase sales derived from products outside of our core mechanical
heart valve business. As we look ahead to 2007, we expect to achieve growth in
our mechanical heart valve business as a result of product line extensions and
the expansion of our direct international operations."
Gross profit for the fourth quarter of 2006 increased to 51.0% from 26.1% for
the fourth quarter of 2005.
The operating loss for the fourth quarter was $5.6 million compared with an
operating loss of $5.1 million in the fourth quarter of 2005. The net loss for
the quarter was $6.1 million, or $0.15 per share compared with $3.2 million or
$0.10 per share net loss in the fourth quarter of 2005.
For the year ended December 31, 2006, revenue increased 16.8% to $40.4 million
from $34.6 million reported for 2005. Gross profit for 2006 improved to 51.6%
from 34.1% for 2005. The operating loss was $27.5 million in 2006 compared with
$16.2 million in 2005. The 2006 operating
loss included an acquired in-process research and development non-cash charge of
$14.4 million resulting from the purchase of 3F Therapeutics ("3F") during the
third quarter of 2006 and post-acquisition operating losses at 3F of $1.7
million. Excluding the in-process research and development charge, the adjusted
operating loss for the year was $13.1 million.
"We are particularly pleased with the significant improvement in our gross
profit during 2006 driven by our move to self-manufactured carbon components in
our mechanical heart valve business as well as the increased revenue from new
products," continued Mr. Dale. "During the year, we met our objective to
establish product offerings in the rapidly-growing tissue valve and valve repair
segments of the heart valve therapy market. Our introduction of the Simulus(TM)
line of annuloplasty products for mitral and tricuspid valve repair has more
than met our expectations and positioned us well for continuing growth in the
segment. In 2006 we also enjoyed what may be our most significant accomplishment
to date when we entered the tissue heart valve market through our acquisition of
3F Therapeutics. We have added a remarkable array of tissue technologies and
products to our portfolio that can feed our development pipeline and growth for
years to come."
"Our strategy is successfully moving us from a business based on one product to
a highly innovative and diversified cardiac surgery franchise with a broad
product portfolio," continued Mr. Dale. "2007 will be a year when we assimilate
all of our recent business development activities into a well defined business
entity and continue to execute on our long term growth strategy. We look forward
to reporting on our progress across all of our business platforms in the coming
year."
2007 Outlook
For 2007, the Company expects revenue growth of approximately 15% compared with
2006 and sees gross profit of approximately 60%. "We see mechanical heart valve
revenue growth in the range of 5-10% and non-mechanical heart valve product
revenue growth of greater than 20%. As the mechanical heart valve market becomes
more competitive, the significance of our strategy to diversify into other
product categories will be magnified. We will continue to evaluate opportunities
to leverage our strong sales and marketing infrastructure, brand and customer
relationships that we have built around our mechanical heart valve franchise,"
concluded Mr. Dale.
Conference Call Today
ATS management will host a conference call and webcast slide presentation today,
March 5, 2007 at 5:00 p.m. ET to discuss its fourth quarter and full year
results, current corporate developments and outlook for 2007. The dial-in number
for the conference call is 800-218-9073 for domestic participants and
303-262-2083 for international participants. The live webcast of the call and
simultaneous slide presentation can be accessed at http://www.atsmedical.com by
clicking on the investor's icon.
A taped replay of the conference call will also be available beginning
approximately one hour after the call's conclusion and will remain available for
seven days. The replay can be accessed by dialing 800-405-2236 for domestic
callers and 303-590-3000 for international callers, using the passcode
11085472#. A replay of the webcast will be available on the Company's website
for one year.
Disclosure of Non-GAAP Financial Measures
ATS reports its financial results in accordance with generally accepted
accounting principles ("GAAP"). In addition, from time to time, we include other
measures in our press releases which are not prepared in accordance with GAAP.
Investors should consider these non-GAAP measures in addition to, not as a
substitute for, or as superior to, financial reporting measures prepared in
accordance with GAAP. In this release we have included adjusted versions of our
operating loss, net loss and net loss per share for 2006. These non-GAAP
measures do not reflect the impact of a $14.4 million acquired in-process
research and development charge incurred as a result of the acquisition of 3F
Therapeutics because we believe that this charge will not be incurred on a
regular basis. We use the adjusted operating loss, adjusted net loss and
adjusted net loss per share measures in our internal analysis and review of our
operational performance. We believe that these non-GAAP measures provide
investors with useful information in comparing our performance over different
periods, particularly when comparing one of these periods to a period in which
we did not incur this kind of charge. By using these non-GAAP measures we
believe investors get a better picture of the performance of our underlying
business. We have also included as an attachment to this release a schedule
which reconciles our operating loss, net loss and net loss per share prepared in
accordance with GAAP to our adjusted operating loss, adjusted net loss and
adjusted net loss per share presented above.
About ATS Medical
ATS Medical, Inc. provides innovative products and services focused on cardiac
surgery. The company, global in scope, is headquartered in Minneapolis,
Minnesota. More than 135,000 ATS Open Pivot(R) Heart Valves, which utilize a
unique pivot design resulting in exceptional performance and low risk profile,
have been implanted in patients worldwide. The ATS 3F(R) brand encompasses
multiple tissue heart valve product offerings at varying steps from market
introductions to clinical trials to development projects that incorporate less
invasive valve replacement technology. ATS Medical's focus on serving the
cardiac surgery community is further strengthened by offerings that include ATS
Simulus(TM) annuloplasty products for heart valve repair, SurgiFrost(R) and
FrostByte(TM) products for surgical cryoablation of cardiac arrhythmias,
RTI-Cardiovascular for allograft tissue services, and the development of PARSUS
blood filtration technology. The ATS Medical web site is
http://www.atsmedical.com .
Safe Harbor
This Press Release contains forward-looking statements that may include
statements regarding intent, belief or current expectations of the Company and
its management. Actual results could differ materially from those projected in
the forward looking statements as a result of a number of important factors,
including the results of clinical trials, the timing of regulatory approvals,
the integration of 3F Therapeutics, regulatory actions, competition, pricing
pressures, supplier actions and management of growth. For a discussion of these
and other risks and uncertainties that could affect the Company's activities and
results, please refer to the Company's filings with the Securities and Exchange
Commission including its Form 10-K for the year ended December 31, 2005, as
amended, and its Form S-4 Registration Statement, as amended, filed with respect
to the merger with 3F Therapeutics.
ATS MEDICAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
Three months ended Year ended
December 31, December 31,
--------------------- ---------------------
2006 2005 2006 2005
--------- --------- --------- ---------
Net sales $ 10,740 $ 9,933 $ 40,449 $ 34,636
Cost of goods sold 5,266 7,339 19,568 22,828
--------- --------- --------- ---------
Gross profit 5,474 2,594 20,881 11,808
Operating expenses:
Sales and marketing 5,851 5,183 21,008 18,948
Research and development 2,011 615 3,381 1,733
Acquired in-process research & development - - 14,400 -
Distributor termination expense 657 - 733 -
General and administrative 2,604 1,871 8,892 7,314
--------- --------- --------- ---------
Total operating expenses 11,123 7,669 48,414 27,995
--------- --------- --------- ---------
Operating loss (5,649) (5,075) (27,533) (16,187)
--------- --------- --------- ---------
Interest expense, net (434) (280) (1,669) (338)
Change in value of derivative
liability bifurcated from
convertible senior notes 3 2,131 1,528 2,131
--------- --------- --------- ---------
Net loss ($ 6,080) ($ 3,224) ($ 27,674) ($ 14,394)
========= ========= ========= =========
Net loss per share:
Basic and diluted ($ 0.15) ($ 0.10) ($ 0.83) ($ 0.46)
Weighted average number of shares outstanding:
Basic and diluted 40,304 31,092 33,537 31,009
ATS MEDICAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
December 31, December 31,
2006 2005
------------ ------------
ASSETS
Cash and short-term investments $10,704 $21,709
Accounts receivable 11,677 10,453
Inventories 18,782 21,286
Prepaid expenses 1,175 1,204
------- -------
Total current assets 42,338 54,652
Property and equipment, net 8,213 8,330
Intangible assets 34,355 22,015
Other assets 934 446
------- -------
TOTAL ASSETS $85,840 $85,443
======= =======
LIABILITIES & SHAREHOLDERS' EQUITY
Accounts payable $ 3,183 $ 3,598
Accrued compensation 2,589 2,394
Other accrued liabilities 2,457 1,410
Current maturities of long-term debt 1,133 833
------- -------
Total current liabilities 9,362 8,235
Convertible senior notes payable 17,394 18,776
Notes payable 1,194 903
Shareholders' equity 57,890 57,529
------- -------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $85,840 $85,443
======= =======
ATS MEDICAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW
(IN THOUSANDS)
Year ended December 31,
------------------------
2006 2005
--------- ---------
OPERATING ACTIVITIES
Net loss ($ 27,674) ($ 14,394)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 1,924 1,563
Loss on disposal of equipment 26 35
Stock based compensation 1,103 585
Non-cash interest expense 463 138
Lower of cost or market adjustment -- 700
Change in value of derivative liability bifurcated from
convertible senior notes (1,528) (2,131)
In-process research & development charge related to 3F
acquisition 14,400 --
Changes in operating assets and liabilities, net of acquisition 1,456 2,886
--------- ---------
Net cash used in operating activities (9,830) (10,618)
INVESTING ACTIVITIES
Maturities of short-term investments, net of purchases (990) 2,603
Payments for acquisition, net of cash acquired (717) --
Payments for other intangibles (521) (1,817)
Purchases of leasehold improvements, furniture and equipment (1,208) (2,278)
--------- ---------
Net cash used in investing activities (3,436) (1,492)
FINANCING ACTIVITIES
Proceeds from sale of convertible senior notes, warrants and
embedded derivatives, net of financing costs -- 20,817
Advances on bank notes payable 1,500 --
Payments on bank notes payable (909) (764)
Net proceeds from issuance of common stock 123 534
--------- ---------
Net cash provided by financing activities 714 20,587
Effect of exchange rate changes 544 (159)
--------- ---------
(Decrease) increase in cash and cash equivalents ($ 12,008) $ 8,318
========= =========
ATS MEDICAL, INC.
RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES
(DOLLARS IN THOUSANDS)
UNAUDITED
TWELVE-MONTHS
ENDED
DECEMBER 31,
2006
-------------
OPERATING LOSS, AS REPORTED $ (27,533)
Adjustment to operating expenses:
Acquired in-process research & development 14,400
-------------
OPERATING LOSS, AS ADJUSTED $ (13,133)
=============
NET LOSS, AS REPORTED $ (27,674)
Adjustment to net loss:
Acquired in-process research & development 14,400
-------------
NET LOSS, AS ADJUSTED $ (13,274)
=============
NET LOSS PER SHARE, AS REPORTED:
BASIC AND DILUTED $ (0.83)
=============
Adjustment to net loss per share:
Acquired in-process research & development 0.43
-------------
NET LOSS PER SHARE, AS ADJUSTED:
BASIC AND DILUTED $ (0.40)
=============
Weighted average number of shares outstanding,
basic and diluted 33,537
=============
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